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The Final 3000 Quarter at Hewlett-Packard

LifeboatsIt's the final day of HP's Q1 for 2014, so in about three weeks we'll know how the company has fared in its turnaround. Analyst sites are rating the stock as a hold, or giving the company a C+ rating. It's instructive to see how much has changed from the final quarter when 3000 customers sent measurable revenues to Hewlett-Packard.

That would be the Q1 of 2009, including the final two months of HP's regular systems support sales of November-December of 2008. At the end of '08 HP closed its MPE/iX and 3000 lab. And without a lab, there was no way business critical support would offer much of an incentive to keep HP's support in a 3000 shop's IT budget.

The customers' shake-off of HP's support revenue didn't happen immediately, of course. People had signed multi-year contracts for support with the vendor. But during the start of this financial period of five years ago, there was no clear reason to expect HP to be improve for MPE/iX, even in dire circumstances. Vintage support was the only product left to buy for a 3000 through the end of 2010.

In Q1 of 2009, HP reported $28.2 billion in total sales. In its latest quarter, that number was $29.1 billion. Nearly five years have delivered only $900 million in extra sales per quarter, despite swallowing up EDS and its 140,000 consultants and billions in sales, or purchasing tens of billions of dollars worth of outside companies like Autonomy.

In January of 2009, HP 3000 revenues were even more invisible than the Business Critical Systems revenues of today. But BCS totals back then were still skidding by 15-20 percent per quarter, 20 quarters ago. And even in 2009, selling these alternatives to an HP 3000 was generating only 4 percent of the Enterprise Server group's sales. Yes, all of enterprise servers made up 2.5 percent of the 2009 HP Q1. But that hardware and networking is the short tail of the beast that was HP's server business, including the 3000. Support is the long tail, one that stretched to the end of 2008 for MPE, more than seven years HP announced the end of its 3000 business plans.

It's easy to say that the HP 3000 meant a lot to HP's fortunes. In a way it certainly did, because there was no significant business computing product line until MPE started to get stable in 1974. But the profits really didn't flow off the hardware using that 20th Century model. Support was the big earner, as the mob says of anybody who returns profits to the head of the organization. HP 3000 support was always a good earner, right up to the time HP closed down those labs and sent its wizards packing, or into other company divisions.

It had been a small business all along, this HP 3000. A billion dollars was a great quarter's worth, and the 3000 division never came close. But all of HP's business critical servers together only managed $700 million in sales -- five years ago. The profits from such customers were only significant because of support relationships. This is why those contracts were the last thing HP terminated.

This eventually became a good thing for the stalwart support companies that remained by the 3000 manager's side. At least there was no HP to quote against a company like Pivital Solutions that specializes in real MPE/iX support, for example. No vendor claims of "we can engineer a patch or software fix" that a system vendor uses to retain a customer. By January of '09, HP Support took on the remaining 3000 operations and briefed customers but offered no clue on how much contact the community might expect from support. HP's community liaison to the 3000, its business manager and lab experts departed. 

The final months of 2008, which made up that very last HP 3000 quarter, capped a year with many months of no information whatsoever from the vendor. HP didn't appear eager to address much except the migration nuances still available to companies leaving the platform. To nobody's genuine suprise, Hewlett-Packard wasn't winning much migration business from 3000 customers making a transition.

We know that's true because of a report from Stromays during 2010. Sometime during 2008, HP re-established contact with the only company that made a concerted effort to emulate an HP 3000. According to Stromasys CTO Dr. Robert Boers, three out of every four departing 3000 sites chose a non-HP environment. And without MPE/iX to support, the only money a former 3000 owner would be sending -- if they were pragmatic, and not incensed -- would've been for HP's Intel-based Proliants, running Windows.

The quarters of 2009 and 2010 might have eked out a bit of revenue from 3000 owners. Some were determined to purchase the HP support that had no hope of fixing problems via new engineering. But HP was not encouraging this by the final months of Q1, 2009

HP strongly recommends that customers request all available PowerPatches and SW Media that they may need for the remainder of the life of their e3000 systems, before December 31, 2008. Customers under Mature Product Support without Sustaining Engineering (MPS w/o SE) can still request PowerPatches and SW Media during the remainder of the Limited Support Extension, through their local HP Representative or Contract Administrator; however, processing and delivery time may vary.

The one and only source of revenue today from the HP 3000 community to HP -- something that will comprise a scant trickle of cash -- is the $432 license transfers, still in place after five years to enable an emulator to replace a 3000. 

The HP Software License Transfer process will continue to be used in the event an HP customer wishes to transfer an existing MPE/iX Right-To-Use (RTU) license from a valid e3000 system to an emulation platform of the customer’s choice that runs on other licensed HP products. It will be a system-to-system transfer, regardless of the number of CPUs on the destination platform.

Even in the situation of forcing companies off a server that was working, Hewlett-Packard attempted to keep them on hardware "that runs on other licensed HP products." Classy to the end. HP signed off in January of 2009 with a thanks for all the fish message, urging everybody to get to a lifeboat. But few of the boats would be flying an HP flag, despite these lyrical hopes.

Finally, we want to take this opportunity to thank OpenMPE, Interex, Encompass, and Connect for their dedication to customer advocacy over the years, our HP e3000 ISVs, tools, and support partners that have contributed a rich set of products and services on top of MPE/iX for our customers, and our migration service and tools partners for their invaluable services and products in assisting our customers with their migrations to other HP solutions. Most of all, our sincere thanks to our valued customers. HP looks forward to continuing to provide our customers the best-in-class services and the opportunity to serve you with other HP products.